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Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at LME Week Asia 2015, organised by the Hong Kong Exchanges and Clearing Limited (HKEx), at the Hong Kong Convention and Exhibition Centre this morning (May 20):
Charles (HKEx Chief Executive, Mr Charles Li), Garry (HKEx Co-head of Global Markets and London Metal Exchange (LME) Chief Executive, Mr Garry Jones), ladies and gentlemen,
Good morning. It is indeed my great pleasure to join you all for today's Commodities Seminar, one of the premier events of this year's LME Week Asia.
So, yes, there is a lot to look forward to. Unfortunately for your heavy metal fans, there is really no truth to the rumour that Motorhead will provide the background music for today's networking lunch. The last I heard that Charles told me, we have to make do with Black Sabbath. The good news is that he will be joining them on vocals this evening, in a medley of their greatest hits. I know you are all looking forward to that.
Joking aside, the Hong Kong Exchanges and Clearing Limited does have plenty to sing about these days. That certainly includes HKEx's commodities' business strategy. Thanks to LME, HKEx has, in just three years, built a world-class, multi-commodities' future exchange in Hong Kong. And that has put us in an excellent position to satisfy Asia's demand for trading in commodities futures, particularly the demand driven by the Mainland.
Last year was a remarkable year for the commodities' business. The average daily trading volume on LME hit a fresh record high, rising 4 per cent over the previous year, to more than 700,000 lots. Aluminium, along with zinc and nickel, enjoyed record annual volumes.
And there was a good deal more cheering news. LME's proprietary clearing house, LME Clear, was launched last September. It has helped boost the ability of the LME and HKEx to pursue new markets, new products and other fresh opportunities.
Then, in December last year, HKEx launched in the Hong Kong market its first Asia commodities futures contracts - London Aluminium Mini Futures, London Zinc Mini Futures and London Copper Mini Futures. They are all monthly, cash-settled futures contracts traded in Renminbi (RMB), referenced to the LME global reference price. With the Asian time zone advantage in Hong Kong, the three contracts are traded in both Day Trading Session as well as After-Hour Trading Session.
As Financial Secretary, I am pleased to see the expansion of our market beyond the well-established equity and equity derivatives businesses into new asset classes. Indeed, this is just another smart example of using Hong Kong's unique position at the doorstep of Mainland China, and the heart of Asia.
With our open and well-regulated financial markets, we link Asian market participants with international liquidity pools. In particular, we serve as the conduit between the Mainland and the world. We bridge international liquidity with Mainland markets, and the Mainland liquidity with international markets.
I would say that dovetails really well with the Shanghai-Hong Kong Stock Connect, launched only last November. The groundbreaking initiative allows Hong Kong and overseas investors to invest in stocks listed in Shanghai, while the Mainland investors can do the same in shares listed in Hong Kong. Stock Connect expands the sources of investment for both markets, while boosting their competitiveness. It also assists in the gradual opening of the Mainland's capital account and the internationalisation of RMB as an investment currency for global investors.
To date, it's been all smooth sailing. Some might say it has been high-speed smooth sailing. And we would not quibble on that. Not after last month's results, with both Shanghai-bound and Hong Kong-bound turnovers breaking single-day records. Indeed, the highest combined daily turnover reached some US$5 billion.
The offshore RMB market in Hong Kong has been stable, accommodating related fund flows in an orderly fashion. We are discussing with the relevant authorities of the Central Government regarding the launch of the Shenzhen-Hong Kong Stock Connect and the enhancement of the Shanghai-Hong Kong Stock Connect to take the mutual market access scheme to the next level.
Let me add that the Stock Connect has catalysed two-way RMB fund flow between the onshore and offshore markets, while further increasing the liquidity of the offshore RMB market in Hong Kong. With the full support of the Central Government, Hong Kong has become the world's largest offshore RMB centre, promoting the healthy circulation of RMB funds, and reinforcing the use of RMB as a trading and investment currency, while maintaining the stability of the on-shore market.
We are also looking forward to the implementation of the mutual recognition of funds between the Mainland and Hong Kong, allowing cross-border offering of funds and deepening the mutual access between the two markets. No doubt, this arrangement will give further impetus to development of our asset management industry by further diversifying fund products in the Mainland and Hong Kong and provide another investment option for offshore RMB funds.
We shall, of course, continue to strengthen the RMB business links with overseas markets and promote the RMB business between Hong Kong banks and international financial institutions and corporations.
As you know, the Central Government recently announced details of the "One Belt, One Road" initiatives, the goal being to promote economic development throughout Eurasia by strengthening co-operation at all levels. The "One Belt, One Road" or the OBOR initiatives will also work to enhance the entire region's competitiveness.
As a global financial services centre, Hong Kong has much to offer for this ambitious and far-reaching vision. To begin with, we can help the Mainland enterprises that are looking to "go global", offering them a wide range of professional services.
We can also contribute to the development of the Asian Infrastructure Investment Bank, the so-called AIIB. With 57 prospective founding members, AIIB will help address the region's infrastructure financing funding gap, estimated to be some US$800 billion annually through 2020.
Our financing and asset-management professionals, together with our wide-ranging financial products, can also help the AIIB in such areas as project financing, investment, financial management as well as foreign-exchange management.
So again there is much to look forward to. And that includes recent developments on two other fronts. In March, we introduced a bill into the Legislative Council to extend the profits' tax exemption for offshore funds to private equity funds.
Later in the year, we shall be introducing another bill, this one allowing interest deductions under the profits tax for corporate treasury centres; it would also reduce the profits tax for specified treasury activities by 50 per cent. In addition, we are planning to introduce an open-ended fund company structure to expand Hong Kong's investment fund vehicles.
We have also just set up a Steering Group on Fintech, Financial Technologies. The group will map out a strategy to help turn Hong Kong into a hub for Fintech start-ups. It is an area that offers great promise, and we shall work closely with the stakeholders to bring it to financial life.
Ladies and gentlemen, we are taking full advantage of the possibilities afforded Hong Kong, as the Asian global financial centre in China. I am sure that today's seminar, and LME Week Asia in general, will identify even more opportunities. And that Hong Kong, and each and every one of you here today, will reap the rewards.
My thanks to the Hong Kong Exchanges and Clearing Limited for staging this very special week, for making it a flagship industry event, and for promoting the development of the commodities business in Hong Kong and throughout the region. Thank you very much and have a great day.
Ends/Wednesday, May 20, 2015
Issued at HKT 11:16
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